But yaho o f ailed to pay attentio n to go o gles

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Unformatted text preview: ver the same perio d Amazo n’s pro f its are up nearly threef o ld—in a recessio n. Timing and techno lo gy alo ne will no t yield sustainable co mpetitive advantage. Yet bo th o f these can be enablers f o r co mpetitive advantage. P ut simply, it’s no t the time lead o r the techno lo gy; it’s what a f irm do es with its time lead and techno lo gy. True strategic po sitio ning means that a f irm has created dif f erences that canno t be easily matched by rivals. Mo ving f irst pays o f f when the time lead is used to create critical reso urces that are valuable, rare, to ugh to imitate, and lack substitutes. Anything less risks the arms race o f o peratio nal ef f ectiveness. Build reso urces like brand, scale, netwo rk ef f ects, switching co sts, o r o ther key assets and yo ur f irm may have a sho t. But guess wro ng abo ut the market o r screw up executio n and f ailure o r direct co mpetitio n awaits. It is true that mo st tech can be co pied—there’s little magic in eBay’s servers, Intel’s pro cesso rs, Oracle’s database so f tware, o r Micro so f t’s o perating systems that past rivals have no t at o ne po int impro ved upo n. But the lead that each o f these tech-enabled f irms had was leveraged to create netwo rk ef f ects, switching co sts, data assets, and helped build so lid and well-respected brands. But Google Arrived Late! Why Incumbents Must Constantly Consider Rivals Altho ugh its share is slo wly ero ding, Yaho o ! has been able to ho ld o nto its lead in e-mail f o r so lo ng because the f irm quickly matched and nullif ied Gmail’s mo st signif icant tech-based inno vatio ns bef o re Go o gle co uld inf lict real damage. P erhaps Yaho o ! had learned f ro m prio r erro rs. The f irm’s earlier f ailure to respo nd to Go o gle’s emergence as a credible threat in search advertising gave Sergey Brin and Larry P age the time they needed to build the planet’s mo st pro f itable Internet f irm. Yaho o ! (and many Wall Street analysts) saw search as a co mmo dity—a service the f irm had subco ntracted o ut to o ther f irms including Alta Vista and Inkto mi. Yaho o ! saw no co nf lict in taking an early investment stake in Go o gle o r in using the f irm f o r its search results. But Yaho o ! f ailed to pay attentio n to Go o gle’s advance. As Go o gle’s inno vatio ns in techno lo gy and interf ace remained unmatched o ver time, this allo wed the f irm to build its brand, scale, and advertising netwo rk (distributio n channel) that grew f ro m netwo rk ef f ects because co ntent pro viders and advertisers attract o ne ano ther. These are all co mpetitive reso urces that rivals have never been able to match. No w Go o gle (and Apple, to o ) are o nce again running f ro m this playbo o k—turning the smartpho ne so f tware market into what increasingly lo o ks like a two -ho rse race. Many rivals, including Micro so f t, had been trying to create a mo bile standard f o r years, but their technical inno vatio ns o f f ered little durable strategic value. It wasn’t until app sto res f lo urished, o f f ered with a high-quality user experience, that do minant smartpho ne platf o rms emerged. Yes, Go o gle and Apple arrived late, but no thing bef o re them had created def ensible strategic assets, and that lef t an o pening. Go o gle’s ability to succeed af ter being late to the search and mo bile party isn’t a sign o f the po wer o f the late mo ver; it’s a sto ry abo ut the f ailure o f incumbents to mo nito r their co mpetitive landscape, reco gnize new rivals, and react to challenging o f f erings. That do esn’t mean that incumbents need to respo nd to every po tential threat. Indeed, f iguring o ut which threats are wo rthy o f respo nse is the real skill here. Video rental chain Ho llywo o d Video wasted o ver $ 300 millio n in an Internet streaming business years bef o re high-speed bro adband was available to make the ef f o rt wo rk.N. Wingf ield, “Netf lix vs. the Naysayers,” Wall Street Jo urnal, March 21, 2007. But while Blo ckbuster avo ided the balance sheet– cratering gaf f es o f Ho llywo o d Video , the f irm also f ailed to respo nd to Netf lix—a new threat that had timed market entry perf ectly (see Chapter 4 "Netf lix in Two Acts: The Making o f an Eco mmerce Giant and the Uncertain Future o f Ato ms to Bits"). Firms that quickly get to market with the “right” mo del can do minate, but it’s equally critical f o r leading f irms to pay clo se attentio n to co mpetitio n and inno vate in ways that custo mers value. Take yo ur eye o f f the ball and rivals may use time and techno lo gy to create strategic reso urces. Just lo o k at Friendster—a f irm that was o nce kno wn as the largest so cial netwo rk in the United States but has beco me virtually irrelevant to day. K E Y TAK E AWAYS I t doesn’t matter if it’s easy for new firms to enter a market if these newcomers can’t create and leverage the assets needed to challenge incumbents...
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This document was uploaded on 01/31/2014.

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